Rate Cut Applauded for Economy & Property Sector
The decision by the Reserve Bank to cut the repo rate by a further 100 basis points to 4.25% (bond rate to 7.75%) is to be applauded and absolutely necessary for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group.
“This rate cut takes the interest rate to a new historic low. Together with the previous cut, this is vital for when the country comes out of the COVID-19 Lockdown and the recovery starts,” says Seeff. The two rate cuts provide a saving of about 20% for property buyers and is a significant boost for demand.
“Though this decision will have negative consequences for the rand, I believe that the upside benefits outweigh the downside risks that this cut poses for our economy. The immediate relief this decision provides to both consumers and businesses is exactly what our country needed at this time,” says says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
Goslett advises: “South Africans would be wise to use this cut to pay off debt as quickly as possible. If you can afford to do so, keep your repayments at the same value before the cut. If you were paying R10,000 per month, then continue to pay this amount so that you can shorten your loan term and save on interest charges. If you cannot afford to do this, then use the money you save on interest charges to avoid purchasing items on credit and getting yourself into further debt.”
“From a property perspective, it is hoped that part of the easing of lockdown restrictions will include reopening or at least partial reopening of the Deeds Office which will enable transfers to be processed regarding successfully concluded sales transactions, which would aid indebted, distressed sellers already severely impacted by the current economic recession. Furthermore, the freezing of the property industry, which is currently in limbo to a large degree, means that government is precluded from receiving much-needed revenue from transfer duty, which is a significant contributor to SARS,” says Dr Andrew Golding, CEO of the Pam Golding Property group.
Mike Greeff, CEO of Greeff Christie’s International Real Estate concludes: “Industries and consumers who are under a great deal of financial pressure due to the ongoing lockdown will welcome the second major repo cut – as will the property sector. The 1% repo rate cut means that it will be somewhat easier for South Africans to qualify and pay off their home loans, once things return to normalcy.”
“The decision to cut the repo rate by a further 1% shows us the seriousness of the virus’ effects on the economy and the earnest efforts the Reserve Bank is making to ensure that our economy keeps going.”